Pound US Dollar Exchange Rate News: GBP/USD Rangebound Ahead of US PCE Print

Modified: Friday, 28 January 2022 11:05 BST - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: GBP/USD Rangebound Ahead of US PCE Print

GBP/USD Muted Ahead of US PCE Index Release

The Pound US Dollar (GBP/USD) exchange rate is trading in a narrow range this morning as US investors await the publication of December’s core PCE price index.

At the time of writing, the GBP/USD exchange rate is trading at approximately $1.3377, with minimal movement from today’s opening levels.

US Dollar (USD) Mixed as US Investors Await PCE Index

The US Dollar (USD) is edging higher against many of its peers this morning as US investors anticipate a slight upward movement in December’s PCE price index.

The PCE index is the Federal Reserve’s favoured measure of inflation and is predicted to increase from 5.7% to 5.9% this afternoon.

If predictions run true, this will confirm inflation pressures and support the Fed’s current hints of tightening monetary policy faster than first thought.

BNP Paribas analysts wrote in a note:

‘Our new base case for six hikes this year poses challenges to our bullish outlook for U.S. equities.

‘However, it is not sufficient to derail it on a standalone basis if earnings growth remains strong, in our view.’

Throughout this week’s session, hawkish comments from Fed Chair Jerome Powell have caused the ‘Greenback’ to soar against the majority of its rivals.

Pound (GBP) Rangebound as UK Politics Remains Unstable

Meanwhile, the Pound (GBP) is trading flat against the US Dollar (USD) amid ongoing UK political drama.

Following the Met Police’s recent decision to investigate the ‘partygate’ scandal, Sue Gray has been asked to include only ‘minimal reference’ to any parties at Downing Street during the 2020 lockdown.

In addition, Boris Johnson, the UK Prime Minister, is reportedly wavering on whether to go forth with the planned National Insurance hike expected in April.

Whilst No. 10 maintains that there are ‘no plans’ to pause the rise, with Johnson stating on Thursday that ‘we have to fund the Covid backlog, we have to fix social care’, other MP’s are calling for it to be paused due to the high cost of living.

Robert Jenrick, former housing secretary, said:

‘The chancellor should at least consider postponing the increase in National Insurance for one year.

‘[2022 was] going to be an exceptionally hard year for many families across the country [and it] looks increasingly like a sensible thing for the government to do.’

Meanwhile, Rachel Reeves, Labour’s shadow chancellor believes it to be ‘the wrong tax at the wrong time’ and that it ‘not right’ to implement a higher tax on those earning a lower income.

The ongoing political uncertainty is causing the Pound to struggle against its stronger peers during today’s session.

GBP/USD Exchange Rate Forecast: Will US Spending Influence USD?

Looking ahead, the Pound US Dollar (GBP/USD) exchange rate is likely to be influenced by US spending data scheduled for this afternoon.

December’s US personal income is expected to increase from 0.4% to 0.5%, whilst personal spending is predicted to significantly drop from 0.6% to -0.6%.

Next week, ISM manufacturing PMI is forecast to print at 58.3, marginally below the previous reading of 58.7, though above the score of 50 which shows growth in the industry which could lift USD’s potential.

Moreover, the ‘Greenback’ is likely to remain vulnerable to the Fed’s decisions.

On the other hand, the Pound may continue to be susceptible to the UK’s political landscape as the future of the current leadership remains uncertain.

In addition, Sterling may also be influenced at the end of next week’s session by the Bank of England (BoE)’s interest rate decision, which is widely expected to see the bank raise rates from 0.25% to 0.5%.

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TAGS: Pound Dollar Forecasts